The pound surged last week as investors continued to unwind the political risk premium that has weighed on GBP in recent weeks. Meanwhile, the US dollar slumped as markets scaled back Federal Reserve interest rate hike bets.
Last week's key rate movements
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GBP/EUR – Up 0.7% on the week
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GBP/USD – Up 1.2% on the week
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EUR/USD – Up 0.4% on the week
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AUD/USD – Up 0.6% on the week
Pound (GBP)
Nominations for the Labour leadership will open on Thursday, potentially driving volatility in the pound (GBP). If frontrunner Andy Burnham is unopposed, Sterling could strengthen. However, GBP could fluctuate if any other candidates come forward.
Euro (EUR)
This week, the European Central Bank (ECB) is due to publish the minutes from its most recent monetary policy decision. Any signals that another interest rate hike remains on the table could support the euro (EUR).
US dollar (USD)
The Federal Reserve will also release the minutes from its latest rate decision this week. The US dollar (USD) could strengthen if policymakers struck a hawkish tone last month.
Australian dollar (AUD)
Australian economic data is in short supply this week, likely leaving the Australian dollar (AUD) to trade on market risk dynamics. Any shifts in sentiment could see the ‘Aussie’ waver.
South African rand (ZAR)
With South African economic data thin on the ground this week, external factors could determine the South African rand’s (ZAR) direction. Risk appetite, gold prices and USD movement could all contribute to choppy trade in the currency.
Canadian dollar (CAD)
Canada’s latest jobs data could support the Canadian dollar (CAD) at the end of this week, if it shows that unemployment remained at its lowest level since the start of the year in June.
New Zealand dollar (NZD)
For the New Zealand dollar (NZD), the spotlight falls on the Reserve Bank of New Zealand’s (RBNZ) interest rate decision on Wednesday. If the bank raises rates, as expected, NZD could strengthen. Conversely, a surprise hold could see the ‘kiwi’ slump.
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